Main American cryptocurrency alternate Coinbase noticed its long-term issuer credit standing downgraded from BB+ to BB standing by score company S&P International following its newest earnings report this 12 months.
The company confirmed the downgrade in a observe on Thursday, pointing towards Coinbase’s weaker efficiency within the second quarter of 2022 as a driving issue. Intensified aggressive danger within the cryptocurrency alternate sector was additionally highlighted, with Coinbase dropping market share to rivals this 12 months.
“The detrimental outlook displays uncertainties concerning the period of the crypto market downturn and the corporate’s capacity to function effectively by managing working bills prudently.”
The downgrade additionally mirrored the potential for “additional market share deterioration” pushed by the aggressive panorama and regulatory danger. The score company famous that whole buying and selling quantity at Coinbase declined 30% quarter on quarter, whereas whole cryptocurrency spot buying and selling quantity throughout all venues declined solely 3%, resulting in a decrease market share.
The observe conceded that spot buying and selling has turn out to be extra concentrated amongst market-makers and high-frequency buying and selling corporations, of which Coinbase has a much smaller market share.
The continuing cryptocurrency bear market has additionally left its mark, with S&P International highlighting whole property on Coinbase declining 63% to $96 billion from the primary quarter, which has been pushed by weakened cryptocurrency values and web outflows from institutional purchasers.
Associated: Coinbase posts $1.1B loss in Q2 on ‘quick and livid’ crypto downturn
Binance’s transfer to get rid of its Bitcoin buying and selling charges all over the world additionally led the score company to imagine that Coinbase could possibly be compelled to evaluate its personal payment buildings, which stay a significant income supply for the corporate:
“We imagine increased buying and selling charges at Coinbase in contrast with friends, mixed with such aggressive pricing actions by rivals, might improve the chance of payment compression in its retail channel (which generated about 80% of the corporate’s whole revenues within the first half of 2022).”
Regulatory pressures are additionally a priority, with Coinbase beneath the scrutiny of ongoing investigations into its staking applications and classification of assorted listed cryptocurrency tokens. A former Coinbase worker was additionally charged with securities fraud by the U.S. SEC in July 2022, placing the alternate additional beneath the microscope.
Regardless of the downgrade, S&P International expects Coinbase to take care of “low total danger” regardless of macro components which have exacerbated the current cryptocurrency market downturn.
